Gold Prices Drop as Market Digests Tariff Threats and DeepSeek Shock

Gold prices experienced a drop yesterday as markets processed various factors, including tariff threats and a market shock caused by Chinese AI startup DeepSeek. The precious metal has slightly increased from its recent low of $2730/oz to trade around $2750/oz currently.

The drop in Gold prices yesterday may have been influenced by profit taking following a strong rally last week. With the US Federal Reserve interest rate meeting scheduled for tomorrow, market participants may have opted for profit taking ahead of a potentially volatile Wednesday.

Tariff Threats Back in Focus – Bessent vs Trump?

The threat of tariffs resurfaced yesterday, with reports indicating that Treasury Secretary Scott Bessent is advocating for a gradual increase in universal tariffs, starting at 2.5% and potentially reaching 20%. President Trump has expressed interest in even higher tariffs, including specific taxes on products like steel, copper, and semiconductors.

This contradicts market expectations of tariffs being applied on a case-by-case basis, similar to the situation with Colombia. The actively developed tariff plans by the Treasury have led to significant price action in the US Dollar, causing volatility in the Dollar Index (DXY).

FED Meeting Ahead – Extended Pause?

The upcoming Fed meeting is expected to result in an extended pause due to the uncertainties surrounding tariffs. Despite previous statements from Fed Chair Powell that policymakers do not focus on politics, meeting minutes revealed concerns about tariffs.

The threat of tariffs continues to impact markets and strengthen the US dollar. However, inflation is a major concern for the Fed, especially with the potential price pressures from specific taxes on products like steel, copper, and semiconductors.

Analysis and Breakdown

In summary, Gold prices dropped due to various factors, including tariff threats and a market shock. The ongoing uncertainties surrounding tariffs and their impact are likely to keep safe-haven flows elevated, supporting Gold prices. Geopolitical and growth concerns may also contribute to the price movement in the coming days and weeks.

From a technical analysis perspective, Gold has shown a bearish trend on the H4 chart, with a descending trendline in play. A candle close above the trendline could lead to a retest of the $2770 level ahead of the FOMC meeting. Monitoring comments on tariffs and geopolitical issues from the Trump administration is crucial, as they could impact global markets.

Overall, understanding the factors influencing Gold prices, such as tariff threats and geopolitical tensions, can help individuals make informed decisions about their investments and finances. By staying informed about market developments and potential risks, individuals can navigate the financial landscape more effectively.

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